Wednesday, August 03, 2011

A Good Week for Plastics

The broad outlook for plastics had some positive news this last week.

On the home front (i.e, in the US), the Corporate Average Fuel Economy (CAFE)standards for automobiles is increasing to 54.5 miles per gallon (mpg) from the current value of 24.1 mpg. [1] That is a tremendous increase, some of which will undoubtedly be met by increasing the number of hybrid vehicles, but also by decreasing the weight of vehicles, and this, in no uncertain terms means increased use of plastics in cars. I've mentioned some of the more innovative ideas in the past (polycarbonate windows, oil pans and mufflers, and carbon-fiber composites) so it is largely a matter of getting these pieces in place, rather than having to invent them anew. While the standards only directly affect the US, the results will certainly be applied around the world to at least some degree.

Elsewhere around the world, capital investment in polymers (and other petrochemicals) is increasing, being led first and foremost by Dow and its partners. Dow and Saudi Aramco are building a $20 billion plant in Saudi Arabia for producing a wide range of basic chemical feedstocks. The project will comprise 26 separate(sub)plants, and is the largest chemical plant ever built.

Dow is also looking beyond the petrochemical paradigm and announced the formation of a joint venture in Brazil with Mitsui to create plastics from sugarcane. It's a much smaller investment, (the number $2 billion seems to be tossed around), but that doesn't surprise me much. [2] Regardless of the feedstock, the investment is still in plastics, a material that won't be disappearing from the planet anytime soon. [3]

[1] This as an average value, actually a harmonic mean, across the entire set of cars sold by a manufacturer, rather than a minimum standard that has to be met by all cars. I won't get into all the details as there are too many of them and they are unimportant here. Whether or not cars hit the new targets or fall short, the bottom line is still the same - car manufacturers will be increasing the gas mileage in their cars.

[2] I've always maintained that we will still be using large amounts of petroleum for far longer than most people would guess - there's too much infrastructure in place and too many people have too much to lose by converting to "green" feedstocks. Since the transition will occur around the world in the 197 or so independent countries, it can't be legislated, so it will occur gradually, not instantly.